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Good start to fiscal 2017 – RWE confirms full-year outlook

Adjusted EBITDA of €2.1 billion, net income of €946 million, adjusted net income of €689 million

Forecast confirmed: last year’s results to be exceeded

Additional indicators for ‘RWE stand alone’ increase transparency

“

We got off to a good start this year and confirm our optimistic outlook as well as the envisaged dividend of 50 euro cents for 2017. Energy Trading made a strong contribution to earnings. Our measures to optimise the power plant portfolio are having an effect and the efficiency enhancement programme is helping us to partially compensate for the decline in electricity prices.

Dr Markus Krebber, CFO of RWE AG

„

During the first three months of 2017, the RWE Group recorded adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) of €2.1 billion and net income of €946 million. As expected, due to a drop in electricity generation revenue, EBITDA was down 6%, whereas net income was up 10%. The significantly improved financial result came to bear here in particular. Net income adjusted for special items totalled €689 million. All of the segments made positive contributions to earnings.

RWE continues to expect an improvement in earnings over 2016 in the current fiscal year. Adjusted EBITDA is projected to total between €5.4 billion and €5.7 billion (after €5.4 billion in 2016). Adjusted net income is anticipated to range between €1.0 billion and €1.3 billion (after €0.8 billion in 2016).

The financial reporting of the RWE Group was adapted to a new segment structure at the start of the year, in order to provide even more transparency for the capital market. The former ‘Conventional Power Generation’ segment was divided into the ‘Lignite & Nuclear’ and ‘European Power’ segments. To ensure the comparability of the figures, the data for 2016 were restated in the new structure. The ‘Trading/Gas Midstream’ segment is now called ‘Supply & Trading’, but this change affects the name only.

Lignite & Nuclear segment suffers from lower electricity prices

During the first quarter, the adjusted EBITDA of the Lignite & Nuclear segment fell to €213 million. The main reason for this was lower wholesale prices of electricity compared to the same period last year. This decline was partially offset by positive effects of the ongoing efficiency-enhancement programme. For 2017 as a whole, RWE forecasts that adjusted EBITDA of this segment will be much lower than last year.

European Power segment posts a rise in earnings for the first quarter

Despite falling margins, adjusted EBITDA rose to €167 million. Along with measures to improve efficiency, a stronger contribution made by the commercial optimisation of power plant utilisation had a positive effect. For fiscal 2017, RWE nevertheless expects that EBITDA will fall short of last year’s level, as it will not be possible for the aforementioned measures to fully compensate for the decline in margins of power generation from gas and hard coal.

Supply & Trading segment makes large contribution to earnings

Adjusted EBITDA in the Supply & Trading Division amounted to €146 million. Performance in the first quarter of 2016 was extremely robust, and therefore the slight decline did not come as a surprise. Moreover, in Q1 2016 we also recorded a profit on the sale of the hard coal-fired Lynemouth power plant in the UK. For the year as a whole, RWE projects a significant improvement in full-year earnings. Averaged over the medium term, energy trading is expected to unleash sustainable earnings potential in the order of about €200 million p.a.

innogy posts slight improvement

The financial investment innogy increased adjusted EBITDA to €1.6 billion. innogy expects to close the year moderately up on last year, in part due to declining expenses for the operation and maintenance of the distribution networks. innogy released details on its earnings in its interim statement published on 12 May.

Net income rises by 10%

Due largely to the improvements in the financial and non-operating results, net income rose to €946 million, compared to €860 million in the same period last year.

Adjusted net income slips

Adjusted net income amounted to €689 million after €838 million in the first quarter of last year. In contrast to net income, it excludes one-off effects and other material special items.

Net debt on a stable path

As of 31 March 2017, net debt of the RWE Group amounted to €23.7 billion, up €1.0 billion on the figure recorded by the end of 2016. This mirrored the negative free cash flow, which was mainly characterised by seasonal effects. First-quarter electricity and gas sales are usually above average for weather related reasons. By contrast, payments from customers are spread evenly over the year. This causes receivables to rise significantly in the retail business and commensurately lower operating cash flows. Furthermore, a large portion of the expenditure on CO2 emission allowances occurs in the first quarter. For the year as a whole, RWE anticipates that net debt will be of the order of last year’s figure at the end of 2017.

Supplementing the fully consolidated financial reporting, starting in 2017 RWE is also publishing additional indicators for ‘RWE stand alone’. This covers the core business areas Lignite & Nuclear, European Power and Supply & Trading as well as innogy’s dividend. Since its strategic restructuring, RWE has used these indicators to manage its operating business. This shows how the company generates the available free cash flow, which forms the basis for the dividend.

For ‘RWE stand alone’, adjusted EBITDA amounted to €514 million and adjusted net income totalled €203 million. This does not include innogy’s dividend payment, as RWE receives it in the second quarter. As of 31 March 2017, net debt of ‘RWE stand alone’ amounted to €7.0 billion, essentially unchanged from the end of 2016. This calculation already takes into account the payment of €6.8 billion to the state nuclear energy fund as of 1 July 2017.

Clear focus on security of supply

“The good start to the year encourages us to continue implementing our strategy with resolve,” Markus Krebber concluded. “We are focussing on our core business, security of supply. This entails the further optimisation of the power generation operations, exploiting potential in the core business areas, and actively pursuing new solutions to ensure security of supply.”

The good start to the year encourages us to continue implementing our strategy with resolve. We are focusing on our core business, security of supply. This entails the further optimisation of the power generation operations, exploiting potential in the core business areas, and actively pursuing new solutions to ensure security of supply.

Dr Markus Krebber, CFO of RWE AG

„

At a glance

Forward-looking statements

This press release contains forward-looking statements. These statements reflect the current views, expectations and assumptions of the management and are based on information currently available to the management. Forward-looking statements do not guarantee the occurrence of future results and developments and are subject to known and unknown risks and uncertainties. Actual future results and developments may deviate materially from the expectations and assumptions expressed in this document due to various factors. These factors primarily include changes in the general economic and competitive environment. Furthermore, developments on financial markets and changes in currency exchange rates as well as changes in national and international laws, in particular in respect of fiscal regulation, and other factors influence the company's future results and developments. Neither the company nor any of its affiliates undertakes to update the statements contained in this press release.